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Credit Suisse moves towards Swiss bank spin-off
[ZURICH] Credit Suisse has moved more than 1 million customers into a new Swiss bank which goes live on Sunday, a step towards what could be Switzerland's biggest stock market listing in more than a decade.
The creation of the new subsidiary that caters for Swiss retail, corporate, private and investment banking clients, is part of a broader shake-up of Credit Suisse under chief executive Tidjane Thiam to focus more on wealth management and less on volatile investment banking.
"Setting up the legal entity is a pre-condition on the way to the IPO," Frank Schubert, project leader for the Swiss legal entity, said, referring to the initial public offering (IPO) plans.
Considered one of the group's crown jewels for its profitability, its executives hope the new bank - Credit Suisse (Schweiz) AG - could command a valuation of around 20 billion Swiss francs (S$28.2 billion), according to one source familiar with the bank's thinking.
Credit Suisse Group has a market capitalisation of about 30 billion francs, according to Thomson Reuters data.
Credit Suisse said it was too early to give any guidance on the valuation.
The bank hopes the listing will highlight a part of Credit Suisse the bank believes is undervalued while also paving the way for acquisitions of smaller Swiss banks.
The plan is for the IPO to raise 2 billion to 4 billion francs by selling 20-30 per cent of Credit Suisse (Schweiz) AG, which is run by Credit Suisse veteran Thomas Gottstein.
A valuation at the top end of that range would make it bigger than any Swiss initial public offering since 2001.
Investment banks are already jostling for a role on the IPO. "Everyone is pitching hard on this one," one investment banker said.
But Credit Suisse will need to show it can come close to delivering on an adjusted 2018 pre-profit target for the Swiss business of 2.3 billion francs from 1.6 billion in 2015 if it is to list at the top end of the price range, a goal some analysts consider overly ambitious.
Expected next year, the listing will help to fund Mr Thiam's broader overhaul and will also raise cash to bolster the group's balance sheet. Mr Thiam aims to bring the bank's main capital ratio to 13 per cent by the end of 2018. It was 12 per cent at the end of the third quarter.
GAM fund manager and Credit Suisse investor Daniel Haeuselmann believes the need for cash is a key reason for the listing, saying, "I think it's more a way to raise capital without significantly diluting shareholders' investments".
Credit Suisse has said market conditions will decide the timing of the IPO but it is currently pencilled in for the second half of 2017.
The creation of Credit Suisse (Schweiz) AG is also part of Swiss efforts to safeguard the country's economy from another banking crisis by getting major banks to ring-fence parts of their business.
Local rival UBS established a new Swiss subsidiary in 2015.
The new legal entity going live has involved the transfer of around 1.4 million clients into the new bank and the creation of a board of directors. Credit Suisse will reveal at a later stage the amount of assets transferred.
Credit Suisse (Schweiz) AG has been created mainly from the group's Swiss universal banking business, one of three regional divisions set up in Thiam's restructure alongside Asia Pacific and International Wealth Management.
The bank has not yet published financial results for Credit Suisse (Schweiz) AG, although it is expected to give more details at an investor day on Dec 7.
Based on numbers for the Swiss universal bank, it contributed more than a fifth of group net revenues between 2013 and 2015.